Monday, December 14, 2009

An Empty Front for What?

“But what I hadn't realized until just this morning, is that the collapse of the financial sector in 2008 killed Adam Smith and Milton Friedman. Their ideas should have been dead long ago but they kept hanging around because they provided the cover by which the powerful could continue to enrich themselves (at the expense of everybody else). But the collapse of the entire global financial system in 2008 and the fact that federal governments around the world had to come in and rescue the titans of finance with trillions of taxpayer dollars (and pounds and Euros and Deutsche Marks), definitively shows that Adam Smith and Milton Friedman were just shakedown artists. Rather than being an elegantly self regulating machine in tune with the deepest truths of the universe it turns out that our financial system in criminally corrupt and hopelessly unable to survive without massive government assistance. …

… And here's the craziest thing in all of this. The financial collapse of 2008, not only killed Smith and Friedman, but it also brought Marxist critiques of capitalism back to life. Well technically speaking, Marx was wrong and Nikolai Kondratiev was correct -- but the fundamental point of both men remains and has now been confirmed: an endless cycles of booms and busts are intrinsic to capitalism and capitalism is an inherently unsustainable system. Furthermore, it is only through a strong state regulatory system that the vicissitudes of capitalism can hope to be controlled.… In some ways then we live in a remarkable time with enormous political, economic, and even philosophical instability. Adam Smith and Milton Friedman are dead. And Marx and Kondratiev had prescient critiques of the problems of capitalism, but no solution for an alternative approach that is more sustainable. So for the time being the regulated capitalism of Keynes becomes the big winner. And maybe that's the best that we can do. But it seems to me that there is also a higher synthesis waiting to emerge from this whole crisis -- if we can just figure it out before the gaping abyss of uncertainty causes people to completely freak out.”

In the comments to a critic of his piece, RFK defends his caricature of Adam Smith:

“Thanks for your thoughtful comment. Too often in the popular debate (and I include myself in this critique), we deal with the caricature of these men or what they have come to represent rather than the actual writings themselves.”

Comment:Anonymous seems to be carried away with his (her?) rhetoric:

“Rather than being an elegantly self regulating machine in tune with the deepest truths of the universe it turns out that our financial system in criminally corrupt and hopelessly unable to survive without massive government assistance.”

I cannot speak for Milton Friedman on “self-regulating machine in tune with the deepest truths of the universe" (a trifle hyperbolic surely) but I do not recognize Adam Smith, the moral philosopher, historian, and social commentator in these assertions.

From his knowledge of history (and speculations about pre-history), Smith was unlikely to have considered the emergent commercial society of 18th-century Western Europe (itself interrupted from the 5th century by the thousand-year interregnum following the fall of Rome) as other than a typically human phenomenon, with all its long-standing weaknesses, not to mention the thwarted ambitions of Kings and those who influenced them.

Friedman may have exhibited an enthusiasm and too-hasty a vision of modern capitalism as a dominant economic system, in truth unshorn of the errors of mercantile political economy (tariff protection, et al), but such an arrangement was unknown to Adam Smith (who knew neither the word nor the phenomenon – ‘capitalism’ entered the English language only in 1854, that is 64 years after Smith died).

I am not sure what a “shakedown artist” is, being unfamiliar with the term, but it seems to be disreputable and I don’t think it is justified in Smith’s case, nor, if truth be told, in Friedman’s (one can be wrong about something without calling them names). We need not both caricature nor denigrate people who are entitled to some respect. Name calling is not a legitimate nor acceptable form of argument, except perhaps in bar-room verbal brawls.

RFK’s peroration: “the fundamental point of both men remains and has now been confirmed: an endless cycles of booms and busts are intrinsic to capitalism and capitalism is an inherently unsustainable system. Furthermore, it is only through a strong state regulatory system that the vicissitudes of capitalism can hope to be controlled” is questionable on two grounds.

Rhetoric about “an endless cycles of booms and busts” lacks historical and current perspective.

The unmitigated rise in living standards under various forms of capitalism since early 19th century, despite occasional "booms" and "busts", both on its own terms and comparatively is unrivaled by any alternative arrangements, including undeveloped commercial societies, socialist planning - the apogee par excellence of “a strong state regulatory system” if ever there is one – and all pre-capitalist societies known to anthropology.

There is no signs of a vast movement of populations from “unstable” capitalism to take their chances in those parts of the Earth that are non-capitalist.

However, there are large-scale attempts of populations to move in the other direction, apparently willing to risk all for their chance to suffer from “the vicissitudes of capitalism”.

It is precisely because of what Adam Smith has “come to represent” in public discourse, rather than what he advanced in his “actual writings”, of which RFK and many modern economists appear to be uninformed, that Lost Legacy functions.

Or it may be that RFK is aware of what Adam Smith actually laboured to make clear in his Moral Sentiments and Wealth Of Nations, in which case RFK is engaged, albeit, in a deception.